02004cam a22002297 4500001000600000003000500006005001700011008004100028100001900069245012400088260006600212490004100278500001600319520107900335530006101414538007201475538003601547710004201583830007601625856003701701856003601738w0647NBER20180320005400.0180320s1981 mau||||fs|||| 000 0 eng d1 aMakin, John H.10aExchange Rate Behavior under Full Monetary Equilibriumh[electronic resource]:bAn Empirical Analysis /cJohn H. Makin. aCambridge, Mass.bNational Bureau of Economic Researchc1981.1 aNBER working paper seriesvno. w0647 aMarch 1981.3 aThis paper aims to remedy difficulties with some extant empirical tests of the monetary approach to exchange rate determination. Four problems are addressed: explication of and allowance for real exchange rate changes; imposition of interest parity; use of the forward rate as an unbiased predictor of the spot rate; and modeling implications of official intervention in foreign exchange markets and of possible efforts to sterilize effects of intervention in the monetary base. Empirical tests conducted with monthly data on the dollar-DM exchange rate from March, 1973 -December,1979 do not permit rejection of the complex joint hypothesis represented by equations estimated to test the monetary approach. Still, there remained unexplained a large portion of the behavior of the dollar-DM exchange rate in the 1973-79 monthly sample employed. This result suggests that exchange rates may be viewed as prices determined in asset markets where a large and unsystematic flow of information, not captured by monetary or other variables, produces large, unsystematic movements. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w0647.4 uhttp://www.nber.org/papers/w064741uhttp://dx.doi.org/10.3386/w0647